Finra CAT Taps CenturyLink for Private-Link Reporting

Finra CAT, the operator of the consolidated audit trail (CAT) and a unit of the Financial Industry Regulatory Authority (Finra), has contracted CenturyLink to facilitate private links into the CAT.

Shelly Bohlin, chief operating officer of Finra CAT, said they decided to offer private-link file uploading and reporting because there are companies who are more comfortable submitting files through a direct link, rather than through a web portal.

“It’s been a very carefully thought out decision about the type of connectivity we want. If you can’t connect in, nobody’s going anywhere,” said Bohlin, who was speaking at the CAT Industry Conference, which was hosted by Sifma and Deloitte and was held on Sept. 16 in New York. “We will only be supporting private-line connectivity for machine-to-machine connectivity with a private vendor CenturyLink. …Everyone [who prefers a private link] should be able to move forward with that.”

She added that those who use Amazon Web Services (AWS)—which Finra CAT has chosen as its cloud infrastructure provider, in part, due to its security capabilities—may be able to use a feature called AWS PrivateLink to connect to the CAT AWS portal to establish machine-to-machine connectivity. This feature, though, will not be available until January 2020, as Finra CAT still needs some more time to set that option up.

Bohlin said Finra CAT is also in the process of identifying another unnamed vendor for private linkages for industry members who don’t have CenturyLink. A private line lets firms upload files, rejections, acknowledgments, and corrections to their reported trades through a secure file-transfer protocol.

Finra CAT also set up a separate CAT Reporter Portal, which was originally going to be available in February 2020, but will be moved up to December, in time for testing. The portal will also be where feedback on reports will be displayed. CAT reporters must indicate how they want to connect to the database: through a private link or through the portal.

The CAT operator also tapped Kingland Systems to help it create the CAT Customer ID (CCID), which is used to identify individual traders and customers on the CAT while masking personal data. Bohlin, however, pointed out that the Securities and Exchange Commission (SEC) is still deciding which personal data needs to be collected by the CAT, and Finra CAT and other self-regulating organizations (SROs) involved with the platform’s development are awaiting that decision. 

Focus on Large Volume Trades

As testing deadlines near for the CAT, industry members are also being asked to focus on large-volume trades—rather than on more complicated, specialized trades—to meet deadlines for the database.

Jeffrey Kahn, a regulatory reporting specialist at Jane Street, said during a panel at the event that industry members are focusing their questions on outlier cases, but they need to make sure they can actually meet the reporting requirements for December.

“It’s a matter of prioritization,” he said. “Focus on the milestones, on use cases with the highest volumes so you can get to production faster, [and] then you can move on to edge cases. This is new to vendors, too, so ultimately you’re responsible for your own reporting.”

Edge cases—trades that are smaller in volume and specialized—make up the bulk of questions directed to the CAT helpline, as well as the Financial Information Forum (FIF) hotline, said Chris Bok, a director at FIF.

Like Kahn, many panelists were concerned that there may be a reliance on vendors for CAT reporting, but since the CAT is completely new, industry members were told to have a frank conversation with their vendors and work together around meeting all the CAT reporting requirements.

Testing for the first phase of the CAT is expected to begin December this year, and will cover equities trades by large broker-dealers. More complicated trades, specifically complicated options, is scheduled for production in December 2021, though that date could change.